Risk-wary clients refuse to rush into mobile-banking

Scared of being exposed to cyber criminals, most people have restricted the use of mobile applications to checking account balances.

BANGALORE: Banks are pushing mobile business, but cautious customers seem to be in no hurry to make the switch. Scared of being exposed to cyber criminals, most people have restricted the use of mobile applications to checking account balances.

Customer reluctance has compelled banks, which are eager to save time and cut costs, to offer freebies and carry out marketing campaigns to popularise their mobile apps.

"This is very similar to the online banking trend of early 2000s, where customers initially did only low-risk, non-financial transactions like checking their balances or ordering cheque books," said Sridhar Iyer, director for digital business at the Indian arm of Citibank.

"As they got more familiar and comfortable, customers started doing financial transactions but this behavioural change took almost 5-7 years. Mobile adoption has been a lot faster, with online customers being the first to switch over," he said.

As banking evolves from the brick-and-mortar age in India where about a billion people use cellphones, banks can cater to customers over phone at a fraction of the cost of serving them at their branches.

It also helps banks break the physical and financial limitation in reaching out to rural areas.

To popularise mobile apps, the country's largest bank, State Bank of India, is offering instant cash-back of 5 on transfers of at least 5,000.

HDFC Bank and ICICI Bank are luring customers with gift vouchers and discount coupons redeemable at online shopping sites for first-time users of their apps.

There has clearly been greater interest among more sophisticated smartphone users to embrace the new mode of dealing with their banks.

Over a million copies of SBI's app, called Freedom, have been downloaded from Google's Play Store. Of the approximately 100 million customers of the bank, some five million are registered for mobile banking and 15 million transactions have so far been done through mobiles.

Around five lakh clients each of ICICI Bank and HDFC Bank have downloaded their apps.

"Transactions over mobile are definitely cheaper than branch transactions by a huge margin," said Birendra Sahu, senior executive VP for direct banking at HDFC Bank.

In September, RBI deputy governor Harun R Khan said mobile banking transactions cost just a tenth of what it costs at an ATM. They are 50% cheaper than internet banking and 98% less expensive than banking at a branch.

Banking industry insiders said that a typical transaction over the mobile phone application would cost the bank just about 1.50 compared to 40-60 to serve a customer who walked into a branch. If the transaction is done over an ATM, it would cost 15-20.

While more customers are experimenting with banking applications, there is still a long way to go before they use it to its fullest extent as nagging concerns around security persist.

While banks insist that these are early days, they are also candid enough to admit that they must address customer concerns beyond offering freebies.

"Mobile banking is evolving, and we will see more adoption, especially, from the newer generation," said KR Kamath, CMD of Punjab National Bank and chairman of the Indian Banks' Association.

"Banks have to address the security concern more aggressively; only then would customers get more comfortable."